Tough trade rules to keep speculators at bay
The mainland's first stock index futures to be launched next week are expected to get off to a lacklustre start as Beijing steps up efforts to curb speculative activity in the market.
However, in the long run, analysts say derivatives trading will eventually make China the world's busiest equity market.
Vice-Premier Wang Qishan, in a letter to the opening ceremony for the equity-based derivatives market yesterday, said that regulators would give top priority to risk-control when the new product is launched on April 16 at the China Financial Futures Exchange in Shanghai.
The equity index derivatives are part of the process of liberalising the mainland markets by allowing margin trading and short selling.
'We must strike a balance between liberalisation and regulation,' Wang said. 'It is the top task for us to avoid systematic risks.'
Analysts said the statement indicated that regulators will use administrative measures to curb speculation on the futures, based on the CSI 300 Index, if trading proves robust during their debut.
'The regulator believes if there is a huge trading volume, it will show that China's stock market is a speculators' market,' said Shu Chao, an analyst with Haitong Futures. 'It hopes trading will be stable when the derivatives are launched.'
The China Securities Regulatory Commission set the margin requirement at 12 per cent, against the 10 per cent expected by the market in what CSRC chairman Shang Fulin described as a move to curb speculation.
About 3,000 investors opened accounts at the new exchange to trade index futures, a tool to help investors hedge against market drops.
Brokerages have predicted that the derivative would boost trading on the stock market, which would overtake the United States as the world's largest in terms of trading value.
The Shanghai Stock Exchange was Asia's busiest last year.
Shanghai exchange president Zhang Yujun told a financial forum yesterday the bourse would keep growing at a torrid pace in the coming decades, with thousands of companies lining up to list.
Analysts said it will take about six months before the mainland's financial futures market really takes off.
Investors in financial futures must make a minimum deposit of 500,000 yuan (HK$568,550). Applicants opening accounts at the futures exchange must undergo a training course and tested on their basic knowledge of financial derivatives.
Qualified foreign institutional investors in A shares are barred from dealing in index futures.
Setting a bar
Futures investors must place a deposit, undergo a course and sit a test
The margin requirement imposed by the regulators for trading in index futures: 12%
